Publication type: Working paper – expertise – study
Title: Debt-sensitive majority rules
Authors: Becker, Johannes Gerd
Grimm, Oliver
Gersbach, Hans
Extent: 52
Issue Date: 2010
Series: CEPR Discussion Paper
Series volume: 7860
Publisher / Ed. Institution: Centre for Economic Policy Research
Publisher / Ed. Institution: London
Language: English
Subjects: Public Good; Debt restriction; Debt-sensitive majority rule; Fiscal policy; Public debt; Simple majority rule; Voting
Subject (DDC): 330: Economics
Abstract: We examine debt-sensitive majority rules. According to such a rule, the higher a planned public debt, the higher the parliamentary majority required to approve it. In a two-period model we compare debt-sensitive majority rules with the simple majority rule when individuals differ regarding their benefits from public-good provision. We establish the existence of Condorcet winners under debt-sensitive majority rules and derive their properties. We find that equilibrium debt-levels are lower under the debt-sensitive majority rule if preferences regarding public goods are sufficiently heterogeneous and if the impact of debt on future public-good provision is sufficiently strong. We illustrate how debt-sensitive majority rules act as political stabilizers in the event of negative macroeconomic shocks.
License (according to publishing contract): Licence according to publishing contract
Departement: School of Management and Law
Organisational Unit: Institute for Risk & Insurance (IRI)
Appears in collections:Publikationen School of Management and Law

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